If you’re still digesting the Consumer Financial Protection Bureau’s 1,888-page TILA-RESPA Integrated Disclosures (TRID) rule, the bureau has more reading for you to do: two lengthy updates to the examination procedures it will use to determine whether financial institutions and other real estate industry participants are complying with the new rule that takes effect Aug. 1.
The updates offer mortgage lenders, real estate agents, title and settlement agents, escrow agents and other closing-table parties valuable guidance on how the bureau plans to audit for compliance with the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA) and all of their implementing regulations during the residential mortgage transaction once TRID takes effect.
The updates include a 317-page document outlining TILA compliance procedures and an 88-page guide on the RESPA examination process. The bureau’s full Supervision and Examination manual is available here.
Released by the CFPB in November 2013 as part of its “Know Before You Owe” initiative, TRID consolidates four existing disclosures currently required by TILA and RESPA into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation of the transaction.
The Loan Estimate form replaces the Good Faith Estimate designed by HUD under RESPA, and the “early” Truth in Lending disclosure designed by the Federal Reserve Board under TILA. The Closing Disclosure form replaces the HUD-1 for loan closing, which was designed by the Department of Housing and Urban Development (HUD) under RESPA. It also replaces the revised Truth in Lending disclosure designed by the Fed under TILA.
More bad news: Although many industry participants have been clamoring for a lenient enforcement period during the first few months to give everyone a chance to make a good-faith stab at compliance, the CFPB made no mention of such a concession in the updates. The bureau’s predecessor, HUD, agreed to delay both the implementation of the reverse mortgage financial assessment rule in February and enforcement of the RESPA reform rule in 2010 in response to the industry’s compliance concerns — but with four months to go until TRID takes effect, the CFPB is not budging on the Aug. 1 implementation deadline.
So industry participants will not only be expected to use the new forms after Aug. 1, but they also will be coping with drastic changes to their processes, operations and systems in order to comply with the new regulations. While a typical transaction takes about 30 days, the new process may lengthen that time period to 45 days or more. Any last-minute changes to the transaction may trigger a restart of the entire disclosure process.
And the CFPB will be keeping a watchful eye on everyone as it probes for compliance. Under the methods described in the updates, the CFPB will assess whether mortgage personnel are knowledgeable about TRID’s requirements; review the procedures used to ensure compliance when changes such as interest rates, service charges, computation methods and software programs occur; ensure that the appropriate consumer disclosures are given by prescribed deadlines; review the fees charged to borrowers; review any affiliated business arrangements between settlement service providers; and probe how escrow funds are handled and accounts are maintained, among many other procedures.
The bureau noted that a creditor may not use the TRID forms instead of the current GFE, HUD-1 and Truth in Lending forms for transactions that fall under the purview of TILA or RESPA before the Aug. 1 implementation date. However, most of the trade associations, companies and compliance experts that have been training companies on the new rule will test-run the process alongside their traditional closing procedure to iron out any kinks and identify large-scale compliance roadblocks ahead of implementation.
